Contrarian Value Ideas

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Stericycle - 3 Value Stocks Near 52-Week Lows Worth Buying

These value stocks may be down, but they're far from out.



Sean Williams

Sep 20, 2016



http://www.fool.com/investing/2016/09/20/3-value-stocks-near-52-week-lows-worth-buying.aspx?source=yahoo-2&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2



One person's trash is another's treasure

Next on the list is a company that many investors have tossed in the trash heap recently, but that could wind up being a diamond in the rough. I'm talking about none other than medical waste and confidential disposal business Stericycle (NASDAQ:SRCL).

Whereas sometimes investors need to do some digging to discover why a stock is trading near a 52-week low, none is needed with Stericycle, which has missed Wall Street's profit projections, for either the quarter or full year, in three of the past four quarters. Following its second-quarter earnings release, Stericycle's full-year EPS forecast for 2016 and 2017 fell by $0.26 and $0.53, respectively.

Despite its recent weakness, there are a number of reasons why Stericycle should be a name on your value watchlist. It begins with Stericycle's ability to grow both organically and inorganically. Through the first six months of 2016, Stericycle has generated 3.7% organic revenue growth, but 28% sales growth when acquisitions are factored in. Much of this year-over-year growth comes from its acquisition of Shred-it International last year. However, cost synergies of $20 million from this deal have been delayed, causing Stericycle to push back the full realization of merger synergies from this deal to 2018. While a nuisance for short-term investors, long-term investors stand to benefit from improved margins and higher profits by 2018.

Also, some of the niche numbers that back up Stericycle's growth give hope to optimists. Over the past 20 years the company has completely reversed its trend of being heavily reliant on a handful of large customers to now generating about two-thirds of its business from smaller customers. It also operates in the niche medical waste disposal market, which is expected to grow as the U.S. population ages, helping its pricing power.

If Stericycle can keep its M&A machine churning and grow its sales organically by the low-to-mid single-digits, then this value stock should do just fine over the long run.

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